U.S. defense spending is running on $800 billion a year

 

By Nicholas Anglewicz and Jurgen Brauer

Global Beat Syndicate

AUGUSTA, Ga—For fiscal year 2004, Defense Department expenditures were $436.4 billion, just under one-fifth of the total federal outlays of $2,292.2 billion—but those numbers are a far cry from the real cost of defense. Many Americans think 19 cents on defense for every 81 cents on non-defense costs is a reasonable way to spend each tax dollar.

But the figures are wrong. A more accurate calculation brings us far closer to the truth: each tax dollar actually splits 68 cents for defense and 32 cents on everything else.

The huge discrepancy results from the common misconception that total defense spending equates to Pentagon budget spending. But instead of the $436.4 billion defense expenditure figure used by congressional budgeters, statisticians in the Bureau of Economic Analysis, in the Commerce Department, more accurately counted $548.0 billion for calendar year 2004—a whopping $112 billion difference.

And by our own calculations, U.S. defense spending is much higher than even BEA numbers suggest—$765.6 billion in calendar year 2004. That is $330 billion more—or 75 percent more—than the Pentagon’s budget.

The difference lies in the fact that, for example, nuclear weapons-related outlays come under the Energy Department’s budget, not the Pentagon’s. Likewise, Veterans Affairs has its own department and budget, all of it a defense-related category, reflecting obligations incurred to American service men and women due to past U.S. military activity. BEA accountants systematically reclassify each budget line item into “defense” and “non-defense” categorie, thus arrviving at their $548.0 billion figure for defense spending in calendar year 2004.

 The BEA also recognizes that Fiscal Year 2004 federal outlays of $2,292.2 billion consist to a very large degree of Social Security, Medicaid, and other Trust Fund payments. The trust funds are run via federal government accounts, but because they merely transfer funds to citizens, these do not constitute expenditures for federal government functions, per se, such as agriculture, education, transportation, or diplomacy. Thus, by subtracting mere transfer payments out of the total federal budget, the BEA calculates that after spendin $548.0 billion for defense, the federal government spent only an additional $262.1 billion on all other (non-defense) federal functions, for a total of $810.2 billion. Hence the BEA ratio of 68 cents for defense and only 32 cents on everything else.

The BEA’s accounting is correct as far as it goes, but even BEA accountants leave out an important item: the money spent to service interest on our federal debt.

Most years, our federal government runs a budget deficit, which needs to be financed by borrowing. The resulting interest expense should therefore be allocated to defense and non-defense spending in proportion to their respective share in causing the annual deficits. If, for example, overall non-interest expenditures are $90—involving $60 for defense and $30 for everything else—and if revenue was only $81, then the $9 deficit also needs to be counted: $6 on defense spending, $3 on other federal government spending. The interest on the resulting debt should also be allocated in these proportions.

This “little omission” is not so little: BEA’s computation of total federal government spending of $810.2 billion for calendar year 2004 excludes, incredibly, some $321.7 billion spent in net interest payments that (fiscal) year. Thus, for calendar year 2004, interest payments add $217.6 billion to defense spending, bringing that total to $765.6 billion. Non-defense federal spending thus rises to $366.2 billion.

This means that on a per-capita basis, the average American did not pay $1,488 for defense in 2004, but $2,605. Simply, military costs were $217.08 per citizen per month, while the rest of the federal government ran on $103.83 per citizen per month.

You may still shrug and say, “Well, it’s worth it,” and in a democracy we all must make that determination. But we should keep in mind that when the press reports 19 cents for defense versus 81 cents for everything else, the split really is 68 cents versus 32—the other way around. Defense is not one-fifth of federal spending but two-thirds of it. Considering the ongoing carnage in Iraq, perhaps it is time to reconsider that expense.